1977 (4) TMI 30 - HC - Wealth-tax

Summary

Issues:
1. Whether the provision made for the marriage of the deceased karta's daughters qualifies as a 'debt owed' under section 2(m) of the Wealth-tax Act, 1957, and should be deducted in computing the net wealth of the Hindu undivided family?

Detailed Analysis:
The judgment delivered by the High Court of Madras pertains to a reference made by the Income-tax Appellate Tribunal regarding the deduction of a provision made for the marriage of two daughters of a deceased karta under the Wealth-tax Act, 1957. The Wealth-tax Officer disallowed the deduction of Rs. 70,604, part of the total liability claimed by the Hindu undivided family for the assessment year 1969-70, related to the daughters' marriage provision. The Tribunal, however, allowed the deduction, considering it a legitimate charge on the family estate due to the recognized moral and legal obligation. The Tribunal emphasized that the provision for marriage expenses was a legal obligation accepted by the family, making it deductible under section 2(m) of the Wealth-tax Act.

The High Court analyzed the definition of 'net wealth' under section 2(m) of the Wealth-tax Act, emphasizing that only 'debts owed by the assessee on the valuation date' are deductible. Referring to the Supreme Court decision in Kesoram Industries & Cotton Mills Ltd. v. Commissioner of Wealth-tax, the Court highlighted the definition of 'debt' as a sum of money presently or potentially payable due to an obligation. The Court concluded that unless a specific sum of money was payable by the assessee to another party, it could not be considered a 'debt' under the Act. In this case, the provision made for marriage expenses did not constitute a debt owed by the assessee, as it was merely an accounting provision and not an amount payable to the daughters. The Court criticized the Tribunal for not addressing this crucial aspect and held that the provision did not meet the criteria for deduction under section 2(m) of the Wealth-tax Act.

Ultimately, the High Court ruled against the assessee, stating that the provision for marriage expenses did not qualify as a 'debt owed' under the Wealth-tax Act and should not be deducted while computing the net wealth of the Hindu undivided family. The Court highlighted the necessity of a specific sum payable to establish a debt and criticized the Tribunal for overlooking this fundamental aspect in its decision.